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106
ThefutureobligationsfortheFTRsacquiredatauctionarereflectedontheConsolidatedBalanceSheetsandhavenotbeen
designatedascashflowhedgeinstruments.FirstEnergyinitiallyrecordstheseFTRsattheauctionpricelesstheobligationdueto
PJM,andsubsequentlyadjuststhecarryingvalueofremainingFTRstotheirestimatedfairvalueattheendofeachaccounting
periodpriortosettlement.ChangesinthefairvalueofFTRsheldbyFESandAESupplyareincludedinotheroperatingexpensesas
unrealizedgainsorlosses.UnrealizedgainsorlossesonFTRsheldbyFirstEnergy’sUtilitiesarerecordedasregulatoryassetsor
liabilities.DirectlyallocatedFTRsareaccountedforundertheaccrualmethodofaccounting,and theireffectsareincludedin
earningsatthetimeofcontractperformance.
FirstEnergyrecordsthefairvalueofderivativeinstrumentsonagrossbasis.Thefollowingtablesummarizesthefairvalueand
classificationofderivativeinstrumentsonFirstEnergy’sConsolidatedBalanceSheets:
DerivativeAssets DerivativeLiabilities
FairValue FairValue
December31,
2015
December31,
2014
December31,
2015
December31,
2014
(Inmillions) (Inmillions)
CurrentAssets
Derivatives
CurrentLiabilities
Derivatives
CommodityContracts $ 150
$ 121
CommodityContracts $ (94)
$ (154)
FTRs 7
38
FTRs(12) (13)
157
159
(106)
(167)
NoncurrentLiabilities
AdversePowerContract
Liability
DeferredChargesand
OtherAssetsOtherNUGs(1)(137) (153)
CommodityContracts78
51
NoncurrentLiabilities
Other
FTRs 1
1
CommodityContracts(37)
(13)
NUGs(1) 1
2
FTRs(1) (1)
80
54
(175)
(167)
DerivativeAssets$ 237
$ 213
DerivativeLiabilities$ (281)
$ (334)
(1)NUGcontractsaresubjecttoregulatoryaccountingtreatmentanddonotimpactearnings.
FirstEnergyentersintocontractswithcounterpartiesthatallowfortheoffsettingofderivativeassetsandderivativeliabilitiesunder
nettingarrangementswiththesamecounterparty.Certainofthesecontractscontainmarginingprovisionsthatrequiretheuseof
collateraltomitigatecreditexposurebetweenFirstEnergyandthesecounterparties.Insituationswherecollateralispledgedto
mitigate exposures related to derivative and nonderivativeinstrumentswith thesamecounterparty,FirstEnergyallocatesthe
collateralbasedonthepercentageofthenetfairvalueofderivativeinstrumentstothetotalfairvalueofthecombinedderivativeand
nonderivative instruments. The following tables summarize the fair value of derivative assets and derivative liabilities on
FirstEnergy’sConsolidatedBalanceSheetsandtheeffectofnettingarrangementsandcollateralonitsfinancialposition:
107
AmountsNotOffsetinConsolidated
BalanceSheet
December31,2015
FairValue
Derivative
Instruments
CashCollateral
(Received)/Pledged
NetFair
Value
(Inmillions)
DerivativeAssets
Commoditycontracts
$
228
$
(125
)
$
—
$
103
FTRs
8
(8
)
—
—
NUGcontracts
1
—
—
1
$
237
$
(133
)
$
—
$
104
DerivativeLiabilities
Commoditycontracts
$
(131
)
$
125
$
3
$
(3
)
FTRs
(13
)
8
5
—
NUGcontracts
(137
)
—
—
(137
)
$
(281
)
$
133
$
8
$
(140
)
AmountsNotOffsetinConsolidated
BalanceSheet
December31,2014
FairValue
Derivative
Instruments
CashCollateral
(Received)/Pledged
NetFair
Value
(Inmillions)
DerivativeAssets
Commoditycontracts
$
172
$
(126
)
$
—
$
46
FTRs
39
(14
)
—
25
NUGcontracts
2
—
—
2
$
213
$
(140
)
$
—
$
73
DerivativeLiabilities
Commoditycontracts
$
(167
)
$
126
$
35
$
(6
)
FTRs
(14
)
14
—
—
NUGcontracts
(153
)
—
—
(153
)
$
(334
)
$
140
$
35
$
(159
)
ThefollowingtablesummarizesthevolumesassociatedwithFirstEnergy’soutstandingderivativetransactionsasof
December31,2015:
Purchases
Sales
Net
Units
(Inmillions)
PowerContracts
16
49
(33
)
MWH
FTRs
29
—
29
MWH
NUGs
4
—
4
MWH
NaturalGas
83
—
83
mmBTU